Moody’s applies A1 to UPS notes

Moody's Investors Service said it assigned an A1 rating to the $1 billion of new senior unsecured notes due in 2022 that United Parcel Service, Inc. announced on May 11.

The outlook is stable.

Proceeds will be used for general corporate purposes, including the repayment of commercial paper. The offering memorandum discloses that UPS is considering issuing Canadian dollar-denominated senior unsecured notes as well, and should it choose to do so, the proceeds of those notes would also be used for general corporate purposes, including the repayment of commercial paper. $4.2 billion of commercial paper was outstanding on March 31.

Moody’s said the A1 rating reflects its view that UPS will be a critical enabler of global trade and commerce because of its substantial transportation infrastructure and its unique global reach, as well as the expectation that UPS will maintain credit metrics in line with other single-A rated companies.

“We expect somewhat lower free cash flow in 2017 given increased investment across the franchise, including enhancing automation in the company's hubs. However, Moody's expects lower share repurchases than in prior years, helping to contain pressure on funded debt balances,” the agency said in a news release.

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